Reuters

As the piece reports, equities are either fully valued or overvalued. So as Jack Ablin, chief investment officer of BMO Private Bank in Chicago puts it, earnings and revenue need to come through to support the gains already made. "There's a reasonable chance we could see a 10% correction in the event we get some high-profile disappointments," he tells Reuters.

It's hardly a forgone conclusion that the upcoming earnings and revenue results could trigger a correction in stocks. With 10% of the S&P 500 having reported results so far, 50% have topped earnings forecasts, well below the historical average of 63%, according to Thomson Reuters data. At the same time, more than 67% have beaten revenue expectations, above the long-term average of 61%.

While large-cap stocks on average have resisted a correction thus far this year, biotech stocks have been particularly impressive.

Ivanhoff Blog

"There is one very simple reason why health-care stocks have become a bastion of momentum – The Affordable Healthcare Act," writes Ivanhoff. "Under Obamacare, there are more people with health insurance and therefore more people being able to afford expensive drugs – subsidized by the taxpayers. The system is not sustainable in the long term, but it will boost many biotech companies' cash flows in the next few years. The stock market has been discounting exactly that."

Ivanhoff goes on to say that most general investors shouldn't be deterred from investing in the biotech sector just because they lack the medical and scientific background to truly grasp the products they offer.

"The big question is, are we not missing big time on some incredible opportunities by focusing only on what we understand and can explain?" asks Ivanhoff. "Doesn't it make sense to dedicate part of our portfolio to stocks we like only because of the price action and nothing else? I don't know about you, but for me it does."

There is a lot to question here. For one, the reason why biotech stocks have been moving can't be tied simply to Obamacare. The stocks that get big lifts are actually developing individual drugs that may have big future payoffs.

And the notion of buying stocks on price action or momentum alone seems rather flimsy. That's basically adopting the "greater fool theory" by another name. Warren Buffett is famous for staying away from stocks unless they pass muster using rigorous fundamental analysis. That entails understanding the company and what is does and whether said company can remain competitive and generate earnings and cash flow into the future.

On this point, I'd stick with Buffett.

Finally, I'd like to call out an enterprising piece on the Street Authority website that focuses on stocks in three sectors that will benefit from merger activity in the coming year.

Street Authority

"Looking at the macroeconomic backdrop, a case can be made for even more deal-making in 2014," writes David Sterman. "The economy is stable, which reduces the risk that a deal will come at a time when business trends are weakening. Borrowing costs, though up a bit from a year ago, remain far below levels seen in recent decades. Companies are seeking out new industry niches for expansion, and buying a leading niche player can yield an instant presence."

The three sectors Sterman identifies are gold and silver miners, drug and biotech companies, and nice tech firms that provide needed expertise in areas such as cloud hosting and ecommerce software

"Once a deal or two is announced in a specific niche, then all of the stocks in that niche can be bid up, either because the apples-to-apples comparisons show that rivals are now undervalued, or because investors are speculating on which firm will be next," Sterman writes." Whenever you hear of a deal announcement, it pays to move quickly and research the competitors in that space, as their shares may also soon benefit from M&A speculation."